Qualifying For A FHA Streamline Refinance

FHA changed it’s guidelines so that VERY little is required to qualify for a FHA Streamline Refinance, however, in North Carolina, we have our own State mandated standards, so again – many of the NC Banks can not offer this program the way FHA intended for it to work – WE DO!

FHA says that to qualify:

Employment verification is not required with an FHA Streamline Refinance

Even though we don’t have to verify your job, get a credit score *(see note at bottom regarding credit) or do an appraisal there are some MINIMUM qualifications that must be met (no exceptions).

Current Mortgage Must Be Paid As Agreed For Last 12 Months

FHA is not going to help you refinance to a lower FHA mortgage rate if you have been past due on payments in the last 12 months. You must be current at the time of closing, and you will not qualify if you’ve missed 1 single payment in the past 12 months. (See the * at the bottom regarding Credit)

6 Mortgage Payments Required Between Refinances

Our FHA lenders also require that borrowers make 6 mortgage payments on their current FHA loan, and that 210 days pass from the most recent closing date, in order to be eligible for a Streamline Refinance. You can apply and be approved for the refinance, we just can’t close the loan until after that 210th day.

Net Tangible Benefit

FHA Streamline Refinance borrowers must state “WHY” they want to refinance. Unfortunately, taking cash out of your home, is not considered a “Net Tangible Benefit” for a Streamline Refinance. Because they are not requiring an appraisal, they are not going to let you get more money out. They will let you reduce the terms, from 30 year mortgage to a 25 year mortgage, for instance, or go from an Adjustable Rate to a fixed rate – or simply lower the interest rate… but not cash out to pay off bills. That’s considered a “traditional” FHA refinance (and we do those too – you just have to get an appraisal).

“Rolling In” Closing Costs For The Streamline Refinance

Many Homeowners are use to a mortgage refinance scenario where they simply “roll in” the closing costs associated with the refinance. Again, because they are not requiring an appraisal, FHA prohibits increasing a Streamline Refinance’s loan balance to cover the costs associated with closing the refinance.

The new loan balance is limited by the math formula of (Current Principal Balance + Upfront Mortgage Insurance Premium). All other costs – taxes, origination fee, attorney fees, recording fees – must be either (1) Paid by the borrower as cash at closing, or (2) Credited by the loan officer in full.

If the loan officer is paying the closing costs – the math gets a little tricky because of the new limits we have on what we are allowed to pay and earn. This is especially true on loan amounts under $100,000. It’s important to remember, however, that when you refinance, you “skip” a mortgage payment. Between what the loan officer is allowed to pay, and the money you will have that you won’t be sending off in a mortgage payment, we can generally make this work!

FHA is like a PMI company. They don’t “make” mortgage loans, they insure them. One of the things to remember is that FHA”s insurance rates probably changed since you got your mortgage. You Might be able to get a refund of part of the mortgage insurance with a refinance, and that’s something we will help you with! (Depends on how long you’ve been in the house).

*Regarding No Credit Score. We use DU Automated Underwriting Systems. You will need an AUS approval. Otherwise, we need at least a 600 credit score with a Total Scorecard Approval (there are some additional guidelines that also apply).

About Eleanor Thorne

I see myself differently than most loan officers in the Cary/Raleigh market. As a rare Cary native, I see myself as an expert on the area, on mortgage industry changes & factors that effect rates! I've lived in Cary since 1968 - and I'm second generation "mortgage." I work with my husband, Steve Thorne Mortgage Loan Originator #60596 Equal Housing Lender

I have a FHA loan currently held by bank of America . I would like to refinance . Purchased in 08/08 never late with 6.375 interest . But now have Low credit score. Can I still refinance without a credit check. Balance $137000

First Thank you for the information. I live in Ohio, I have been in my house since 1996, fixed rate 6.52, I had to file Chapter 13 in 2005 it was discharged in June 2010 paid. In Nov my mom got sick I had to drop everything and go to WI to be with her, she passed away and I was a mess. I was late with my payment that Dec. I wanted to refinance with cash out but I can’t find anyone to help me, and I am okay with that. Now I want to streamline and US Bank is telling me I have to have a credit score of 660 or higher (my middle score is 635) if not I have to income qualify which should not be a problem (income to bills) but then they tell me that I can not go from a 30 yr to 15yr FHA loan, that after I income qualify I can do the 30yr and on remainder of the loan and that would lower my payments by about 250, draw back I have to start over and I still have to keep PMI for 5 years even though my loan to value is below 78%. Now my other option is to do the 30yr but amortize on the remaining balance which will only lower my monthly payment by $80. Do I have any other options?

First Thank you for the information. I live in Ohio, I have been in my house since 1996, 85k fixed rate 6.52, I had to file Chapter 13 in 2005 it was discharged in June 2010 paid. In Nov 2010my mom got sick I had to drop everything and go to WI to be with her, she passed away and I was a mess. I was late with my payment that Dec 2010. I wanted to refinance with cash out but I can’t find anyone to help me, and I am okay with that. Now I want to streamline and US Bank is telling me I have to have a credit score of 660 or higher (my middle score is 635) if not I have to income qualify which should not be a problem (income to bills) but then they tell me that I can not go from a 30 yr to 15yr FHA loan, that after I income qualify I can do the 30yr and on remainder of the loan and that would lower my payments by about 250, draw back I have to start over and I still have to keep PMI for 5 years even though my loan to value is below 78% (I owe 60k) and I have to get an apparisal I think my house would apparise at 105k which puts me in at 57% L to V. Now my other option is to do the 30yr but amortize on the remaining balance which will only lower my monthly payment by $80. Do I have any other options? Is this correct